Capellas: Managed Services, Network Security Top Telecom Priorities

Speaking at the Needham Growth Conference in New York, Capellas told an audience of investment bankers that as services converge over an IP backbone, these three areas will have some of the most explosive growth in 2005, and will be key areas of focus for MCI.

"In addition to selling IP as transport, what are the services that will differentiate you above that [layer]?" Capellas asked. "IP-based services will be the fastest-growing segment, and with the adoption of new technologies, customers will look at people they trust to implement that."

Capellas said MCI already manages about 3,000 networks for other companies and plans to increase these types of services in 2005.

However, he said that this will not likely put MCI in competition with MSPs because they are mainly managing pieces of the larger networks -- that is, a data center or a LAN -- rather than managing the larger IP network, as MCI does.

"We haven't yet seen much real pressure for people successfully trying to run networks as part of a [managed] services and integration offering," Capellas said. "I think it's a tough thing to do."

As far as network security goes, Capellas said customers "can never have enough" of these services, which is why they will be so important this year.

Hosting, too, is experiencing a growth trend that will continue into 2006, Capellas said. He said the current incarnation of hosting is not the "old world" in which a company would "come run your SAP applications," but the opportunity for MCI to host network services in its 80 data centers around the world.

Pricing, too, will experience a paradigm shift in 2005, Capellas said. As IP grows in popularity, it is becoming increasingly less important to charge for individual services -- whether voice, data, or video -- going over the network. As a result, MCI this year is committed to radically simplifying its pricing, though Capellas did not disclose how that will be done.

"Whether it's voice, data or video, all that matters is a packet is a packet on the network," Capellas said. "This reduces costs and as a result access costs have to change. I can't tell what's voice, what's data and where it goes. Technology allows us to run all three of them."

Capellas said this overall convergence of voice, data and video streaming over IP is evolving rapidly because their interoperability is key to customer adoption of emerging technologies.

"Anyone who has ever managed technology will tell you the speed of the adoption curve is the ability to allow all three technologies to play together," Capellas said.

In addition to plans to change its pricing model, MCI also has identified three other "pillars" on which it is basing its 2005 strategy, Capellas said. They are becoming the "undisputed leader" in IP, building out MCI's portfolio of services, and to consider what to do with its capital structure now that the company is approaching "zero net debt," he said.

Capellas admitted that it will not be telecom giants that will define the next generation of IP network services, but the IT community, which is driving the evolution by adopting standards at the hardware and OS layer to accommodate a broader range of plug-and-play devices and services.

"Big iron is moving out [in favor of] your Linux or Windows in a series of blades and racks that are more dependent on the network than ever," said Capellas, who previously ran one of the companies driving this hardware commoditization, Compaq, before HP acquired it.